The Federal Government is considering mopping up foreign exchange outside the system as part of the strategy to address the current scarcity and shore up the Naira, Finance and Coordinating Minister of the Economy Wale Edun, announced yesterday.
Edun told reporters at his maiden press conference in Abuja that the fiscal authorities would work with the Central Bank (CBN) to attract foreign exchange into the country from different sources.
He spoke on a day Anambra State governor, Charles Soludo, said the economy inherited by President Bola Tinubu was akin to a “dead horse standing.”
The former CBN governor said dealing with the economy would be tough and “coming months will be bumpy.”
Shedding light on the plan to salvage the Naira, Edun said: “There are substantial sources of foreign exchange open to Nigeria.
“There is a lot of cash outside the system which if brought into the system increases the money supply of dollars and increases the reserves.
“Thought is being given to that. There are funds in domiciliary accounts which, if you give people the incentive, they will utilize those for investment in Nigeria.
“Nigerians in Nigeria have huge holdings of foreign currency in financial institutions abroad.
“We need to provide the environment that brings those funds home so that the owners of these foreign currencies will choose to invest in the Nigerian economy rather than foreign economies, which is what they are doing now.
“We also have a huge source of funds from the diaspora, Nigerians living and working abroad who have families here and who are interested in keeping a presence here. We have to encourage them to save in Nigeria perhaps by improving payment mechanisms ,etc.”
Government, according to him, also expects more foreign exchange from “recovery of oil production which will provide additional foreign exchange liquidity and automatically provide additional naira resources to government.”
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“There’s plenty of hope and it is our determination to put in place the kind of structures and incentive framework that brings Nigerian money abroad and even Nigerian money outside the system into the financial and economic system to work to create jobs for Nigerians,” he emphasised.
The finance minister who also spoke on Federal Government’s efforts to cushion the effects of the fuel subsidy removal said only N2 billion of the N5 billion which the federal authorities offered to each of the 36 states as palliative has so far been released to them.
He said the entire sum of N5billion could not be released at once to mitigate the obvious spike in inflation.
He said: “ It’s a combination of grants from the Federal Government and borrowing by the states. Though the sum of N5 billion is the amount, you will agree with me that to release such fund at once across all the states will be self-defeating because it could lead to an inflationary spiral, exchange rate changing.
“So, it is N2 billion that has been released as an initial intervention and the FCT will be included.”
On the delay in the roll out of palliatives, Edun said “the interventions being put in place are because it took so long for that decision to be taken.”
But he said it would not take much longer than would ordinarily have been needed for the benefits to fit through.
His words: “The poor, vulnerable in particular, need to be helped through that process but rather than being hasty it was just in time.
“In the meantime, the responsibility of the President who took that decision is to help people through it, also we are in a federation, he’s a democrat, he believes in federalism, he believes in fiscal federalism and equity.
“The states and local government have a role to play because the correction of removal of fuel subsidy to their finances means that their finances will now be growing because oil revenue goes to the federation account and is shared by federal, state and local governments. The benefits will go through the system and everybody has a responsibility.”
He explained that the Federal Government “ is not in a position to borrow if you consider 90 percent debt service to revenue and behind that, the rising debt to GDP ratio can’t be ignored.”
Continuing he said: “there is a borrowing requirement built into the 2023 budget appropriated by the National Assembly and that is ongoing. So it is an indication of the commitment of the government to find other sources of funding rather than relying on borrowing”.
The minister said government would “bring down or eliminate a certain type of borrowing as soon as possible and that type of borrowing is borrowing for recurrent as opposed to borrowing for capital expenditure which has a return and which is self-financing”.
The minister also confirmed efforts to wind down the Asset Management Corporation of Nigeria (AMCON) in due course, saying: “work is being done to ensure as much as possible that AMCOM meets its mandate of winding up in the very near future so it’s a question of financial engineering, making arrangements for timely taking care of the liabilities and those responsible include the banking system, CBN and other stakeholders.”
He said Tinubu would “ deliver a better life to Nigerians by encouraging investment that increases productivity that grows the economy and thereby creating jobs and reducing poverty.”
Nigeria loses N6T annually to tax incentives, says Oyedele
Chairman of the Presidential Committee on Fiscal and Tax Reform, Mr. Taiwo Oyedele, who was with Edun at the press conference said Nigeria loses about N6 trillion annually from tax incentives granted to individuals and businesses.
“That’s significant. What we have not been measuring enough is the benefit we are getting from that,” he said.
Oyedele said President Tinubu has given the committee the go-ahead “to look at the incentives regime in Nigeria so that “we can design what is appropriate for us as a country based on data and evidence.
“Those incentives will be targeted, data driven, evidence based and, in most cases, we have sunset clauses so it doesn’t last forever and we only find out after losing so much money.”
On Tinubu’s directive to the committee to increase the nation’s tax to GDP ratio by 18 percent in the next three years, Oyedele said the Federal Government would be generating around N20 trillion annually if the right amount of taxes was paid by those concerned.
He said: “You want to reduce the number of taxes that Nigerians pay. So, that appears like a contradiction. How do you remove taxes and you collect more, but it’s easy to explain because we know where the gaps are, the estimated tax gap which is what we are supposed to collect today, if people should pay the right amount of taxes is in the region of N20 trillion”.
“To close that gap, you rely on automation and the efficiency of collection including harmonisation of how those taxes are collected”.
Kyari: Fuel consumption down to 30%
The Group Managing Director (GMD) of the Nigerian National Petroleum Company Limited (NNPCL), Mr. Mele Kyari, who also spoke at the press conference said the petrol subsidy removal by the Federal Government has forced down fuel consumption by 30 percent in the country.
Current daily demand is about 46 million as against the pre-subsidy removal of 66.7 million litres daily.
Kyari said the NNPCL’s demand for foreign exchange to import fuel has also gone down by 30 percent.
Similarly, oil production has risen to 1.6 million barrels per day from less than one million a year ago.
He said: “We have already seen very significant changes in our production environment and may I also use this opportunity to say that I have just checked the data for Wednesday, actual data for crude oil and condensate production is at 1.6 7 million barrels per day.
“This is substantial. If you look at the situation where we were almost going below a million barrels per day, a year and some months ago, that is just quite substantial.
“And the connection of this to subsidy was that you cannot give what you don’t have. As at the time, Mr. President took the decision, we were actually almost in default. NNPC was facing imminent illiquidity. This is because we kept the subsidy model, the Federation that is the only sub nationals and the federal government were unable to pay their bills for the subsidy.”
Tinubu inherited ‘dead horse standing’ economy, says Soludo
Professor Soludo at a separate forum yesterday said the economy inherited on May 29 by Tinubu was in a very bad shape.
He likened it to a “dead horse standing.” Soludo spoke on Channels Television.
He said:“This government inherited, from a macroeconomic standpoint, I would say the economy was like a dead horse but standing.
“Muddling through this over the coming months will be bumpy, no question about it.
“Literally, the past administration printed over 22 trillion (Naira) and poured into the system backed by nothing.
“Now you have to grapple with high inflation, the impact on the exchange rate and all the destruction.
“I’m willing to give the government the benefit of the doubt. They just set up an economic team.
“But I am glad that at least, the first salvos have been fired by the president, by his courageous step to remove the obnoxious scam that has festered over the years called petrol subsidy and then dealing with the exchange rate.”